TMI Blog1965 (12) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... r the exercise of the power of the State Government under Section 8(2) of that Act and thus that sub-section is not an invalid piece of legislation on the ground already stated above? (iii) Whether the impugned notification of September 3, 1962, is ultra vires the power of the State Government under Section 8(2) of Punjab Act 1 of 1913 and whether it is invalid because it has been issued mala fide to the injury of the petitioners and to the advantage of respondents 2 and 3? The facts out of which this reference has arisen are these. On May 9, 1958, Khillu, Mohan Lal, and Radhey Lal, sold 13 Kanals and 19 Marlas (8,440 square yards) land to Surrinder Kumar and Virander Kumar, respondents 2 and 3. The petitioners, Ramji Lal and Khazan, on January 9, 1959, instituted a suit to pre-empt that sale claiming a preferential right of pre-emption in them. The suit was resisted by respondents 2 and 3. During the pendency of the suit on November 16, 1961, was published notification No. 4965-RIV-61/ 7577 of November 9, 1961, under Section 8(2) of the Punjab Pre-emption Act, 1913 (Punjab Act 1 of 1913), hereinafter to be referred to as the Act, in this form-- In exercise of the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring cork products. Schedule District -- Gurgaon Tehsil -- Ballabgarh Revenue Estate with Hadbast No. -------------- Majesar, Hadbast No. 79, Khasra Nos. 2/16 (1 Kanal 12 Marlas), 17 (2 Kanals 1 Maria), 24 (2 Kanals 12 Marlas), and 25 (7 Kanals 14 Marlas), all totalling to 13 Kanals 19 Marlas.' This notification was issued during the pendency of the appeal of respondents 2 and 3 against the decree of the trial Court decreeing the preemption suit of the petitioners. It was then that on October 1, 1962, the petitioners filed the petition under Articles 226 and 227, and, as stated, this reference arises out of that petition. 3. In so far as the first question is concerned, the Privy Council held that a pre-emptor's claim may be defeated by his losing his preferential qualification to pre-empt after the sale and 'at any time before the adjudication of the suit': Bans Nath y. Ragho Prasad Singh, 59 Ind App 138: (AIR 1932 PC 57). It is settled that a pre-emptor must have his qualification to pre-empt on the date of the sale, on the date of the institution of the suit, and on the date of the decree of the trial Court. Although their Lordships have in terms limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onger to be sound in view of the exactly contrary opinion by the Full Bench in ILR (1944) 25 Lah 443: (AIR 1944 Lah 319 (FB)). It is, therefore, a settled rule in preemption law that a pre-emptor must maintain his qualification to pre-empt to the date of the decree of the first Court only, whether that decree is one dismissing the suit or decreeing it, and his loss of qualification, whether by his own act or by an act beyond his control such as the improvement of his status by the vendee so as to equal or better the status of the pre-emptor, after the date of that decree does not affect the fate of his claim in such a suit. The other cases that take the same view are Megha Ram v. Makhan Lal, 67 Pun Re 1912: 130 Pun Re 1916: (AIR 1917 Lah 135); Kaju Mal v. Salig Ram, 91 Pun Re 1919: (AIR 1919 Lah 222 (2)); Ganda Singh v. Bhan, AIR 1923 Lah 310, and Hazari v. Neki, L. P. A. No. 13 of 1965, dated 27-7-1965: (AIR 1966 Punj 348). The learned Advocate-General has not been able to deny that such is the rule, but what he contends is that this rule has held the field till the decision of the Federal Court in Lachmeshwar Prasad v. Keshwar Lal, AIR 1941 FC 5, in which their Lordships he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1960), where under certain qualifications available for preemption have been taken away, and then by Section 6 of the amending Punjab Act 10 of 1960 new Section 31 in the Act has been added and that Section 31 reads: No Court shall pass a decree in a suit for pre-emption whether instituted before or after the commencement of the Punjab Pre-emption (Amendment) Act, 1959 (1960), which is inconsistent with the provisions of the said Act . This new section is in terms retrospective in the sense that whether the suit for pre-emption is instituted before the date of the amending Act or after, a decree cannot be passed contrary to its provisions, that is to say, contrary to the provisions of amending Punjab Act 10 of 1960. The Federal Court having held in Lachmeshwar Prasad Shukul's case, AIR 1941 FC 5 that an appeal is a rehearing of the suit and at the stage of the appeal the suit is itself pending and is sub judice, it followed logically from that that when the appellate Court gave a decision in such) an appeal, it must be taken to be passing a decree in the suit. Consequently when the new Section 31 is read with the decision of the Federal Court in Lachmeshwar Prasad Shukul&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 20, Rule 14, does not arise, and this factor would appear, therefore, not to be decisive in the matter. In ILR (1944) 25 Lah 443: (AIR 1944 Lah 319 (FB)) the suit of the pre-emptor was dismissed by the trial Court. During the pendency of the appeal by the pre-emptor against the decree, the vendee improved his status so as to be equal to that of the pre-emptor. It was then urged on the side of the vendee that the pre-emptor must fail if at the stage of the appeal he no longer held the preferential qualification to pre-empt the sale in question. The argument advanced for the vendee was precisely the same as has been advanced by the learned Advocate-General in this case and as has been substantially reproduced above. It was said that an appeal is a re-hearing of the suit and continuation of the same and in determining the rights of the pre-emptor or of the vendee the appellate Court may consider any circumstances which have arisen during the pendency of the suit in appeal even though those circumstances, may have come into being subsequent to the decree of the first Court. This argument was repelled by the learned Judges constituting the Full Bench (Harries, C. J. and Abdul Rashi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decreed. The contention, therefore, that the vendee is entitled to improve his status even after a decree and before the pre-emptor has deposited the price in pursuance of the decree has no force and does not advance the matter any further. And if events which took place between the date when the right to pre-empt comes to be effectively recognised by a Court and the date when the deposit of the price is made by the pre-emptor in pursuance of the decree cannot be taken into consideration, much less can events that happen during the pendency of an appeal be looked at or allowed to influence ones judgment in the matter particularly as a Court of Appeal is, as observed before, mainly concerned with the correctness of the decision arrived at by the trial Court . The learned Judges further pointed out There appears to be no principle or reason to extend the period of a vendee's acquisition beyond that dale when the plaintiff's right has been declared to have either come into an existence effectively or otherwise finally adjudicated by the trial Court and the function of a Court of Appeal is confined to an examination as to the correctness of the lower Court's decision . Ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am Lal's case, 1960-62 Pun LR 291 the Division Bench did not approve of those two cases, though those cases were also decided by Division Benches. However, the dicta in those two cases have the support of subsequent Full Bench decision in ILR (1944) 25 Lah 443: (AIR 1944 Lah 319 (FB)) a case which obviously appears not to have been placed before the learned Judges in Ram Lal's case, 1960-62 Pun LR 291 as it was not placed before us in the Division Bench, otherwise this first question would probably never have been referred to a larger Bench as has been done in the present case. In my opinion, ILR (1944) 25 Lah 443: (AIR 1944 Lah 319 (FB)) is a complete answer to the argument of the learned Advocate-General on this first question, and if that decision of a Full Bench of three Judges is to be overruled, in my opinion a larger Bench than the present Bench of three Judges will have to do that. 4. On question two, the learned counsel for the petitioners refers to P. J. Irani v. State of Madras, AIR 1961 SC 1731, for the proposition that guidance for the exercise of the power under Section 8(2) of the Act by the Government should have been available from the preamble and the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1894, is also excluded by Section 9. The last exclusion is, in fact, formally a sale taken by the Government and then made by it, after acquisition of the land, in favour of a company. The learned Advocate-General urges that if respondents 2 and 3 had on behalf of a company wanted to purchase land to establish an industry, they could have made the purchase through the Government with the aid of the provisions of the Land Acquisition Act, 1894, and such a sale would then have been immune from right of pre-emption under Section 9. As those respondents have not been able to form a company in connection with their intended industrial undertaking, they could not have benefit of Section 9 in this respect. The Government has done the next best to further the same object by proceeding to issue a notification, in regard to the sale in their favour, under Section 8(2) of the Act to exclude that sale from the right of pre-emption. The particular sale the learned Advocate-General presses has been for analogous reason as in Section 9. Therefore, it cannot be said that the Government in issuing the impugned notification of September 4, 1962, has acted in an arbitrary manner and not in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary 8, 1959. During the pendency of the suit first notification of November 9, 1961, under Section 8(2) of the Act was published in the Gazette on November 16, 1961. To that date respondents 2 and 3 were precariously defending the preferential claim of the petitioners to pre-empt the sale. It has to be remembered that it is a sale in the name of two private persons. After the issue of the notification under Section 8(2) of the Act on November 9(16), 1961, respondents 2 and 3 found some hope in putting forward an effective defence to the claim of the petitioners, Earlier to that they had addressed a letter on February 22, 1961, to the Director of Industries pointing out that the Development Commissioner, Small Scale Industries, New Delhi, had not taken any action on their communication seeking permission to set up a factory for the manufacture of cork stoppers and other cork products and seeking his help. To that the Director of Industries replied on March 13, 1961, that according to the instructions of Government of India, no approval is now required for the establishment of any industry in the small scale sector. You can, therefore, go ahead with your venture and every assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his manner-- According to the policy decision, we give exemption certificate only to such parties who may sign an agreement deed indicating that the concession given to them would not be misutilized and land would not be sold for making money. The case under reference for drafting the agreement deed, is under the consideration of the Department, the party desires that, as the case is to be considered in the Court at Palwal on the 17th March, 1962, the exemption certificate may be issued in this case immediately. I have given an interim reply to the party to enable them to show this letter to the Court on the 17th when they have to appear in this case before the Judge . The note then points out that the past practice had been, where such an exemption is sought, to refere the matter to the Revenue Department first before the issue of the necessary notification. Accordingly the case was then referred to the Revenue Department with the approval of the Director of Industries given on March 19, 1962. The matter then came before the Deputy Secretary in the Revenue Department, who, on April 27, 1962, sent the case to the Deputy Commissioner (Collector) at Gurgaon, for report on the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of it has been presented, for the best reasons known to them. I have inspected the site also. In the middle of the land an ordinary Kotha 12' x 10' x 8' approximately has been built up by the petitioners. Except this there are no signs of any foundations laid for building a factory. The land has been subjected to pre-emption and in one Court they have already lost the case and decreed in favour of pre-emptors. In order to defeat the object and efforts of the pre-emptors, it appears they thought of this plan to take shelter under notification No. 4965/RIV-61/7577, dated November 9 (16), 1961, issued by the Punjab Government in favour of industrialists, and thus to thwart the provisions of Pre-emption Act. They have another land opposite Railway Station, Faridabad, in the Industrial Area measuring about 2,000 square yards. That land stands in the name of Shri Virandar Kumar, Surinder Kumar along with their father. That area could also be used for this purpose. In view of this I am of the opinion that they are not correct in saying that they purchased this land with the express purpose of setting up a factory for the manufacture of cork products. Since it is pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was suppressed and two days later the Deputy Commissioner (Collector) changed his mind, but the order, which is reproduced above, does not explain why the report of the Tehsildar was not forwarded to the Government. There can be no two opinions that that report had material bearing on the question whether or not this was a case in which the Government would exercise its powers under Section 8(2) of the Act. The Commissioner, of course, endorsed the communication of the Deputy Commissioner without more. When the case came back to the Revenue Department, there is a note of August 14, 1962, in which this is stated-- In this connection it may be stated that it will be appropriate if we may request the Director of Industries, Punjab, to ask the applicants to give the necessary undertaking before the notification is issued. The Director of Industries may also be requested to watch the further progress of the firm in respect of purchase, installation of the machinery and other aspects and intimate to this Department while taking the usual undertaking from the firm. It was pointed out in the note that the Legal Remembrancer was doubtful whether such a notification would be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and his Assistant Superintendent Revenue he changed his mind, suppressed that report, and on the mere statement of the respondents that they intended to set up a factory in the land in question, he proceeded to recommend that exemption notification under Section 8 (2) of the Act be issued in their favour and that this was then followed up by the higher authorities, (g) that obviously the report of the Tehsildar was suppressed which had material bearing on the decision to be taken in the matter of issue of the impugned notification and for this suppression there is no explanation available on the side of the respondents and particularly respondent 1, and (h) that although in the note of the Joint Director of Industries, made on March 14, 1962, it was pointed out that respondents 2 and 3 were to sign an agreement that the exemption to be granted to them would not be misutilised and the land would not be sold for money-making, and although the Revenue Department's note of August 14, 1962 said that the Director of Industries be asked to obtain such an undertaking before the issue of the notification yet no such agreement or undertaking was obtained by anybody from respondents 2 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct of such agencies, whose duty it is to lead up to such action, that has to be considered. And it follows as a matter of course that if there are a number of such human agencies which come in with their reports, opinions and recommendations, then the whole process must be considered that leads up to an action by the Government in the shape of issuance of a notification like the impugned notification. With this approach it is obvious that the impugned notification must be held to have been issued mala fide. The reason in the circumstances of this case is simple. In the first place, the report of the Tehsildar was a crucial and vital document in this case, which would substantially and materially affect the approach of the higher authorities in the conclusion to issue or not to issue the notification. In this respect what happened before the Deputy Commissioner (Collector) had also the same bearing. It should have been disclosed what orders the Deputy Commissioner (Collector) passed first and what was the order which he passed two days later. An endeavour should have been made by somebody to find out what was the fate of the suit of the petitioners and what was the finding given ..... X X X X Extracts X X X X X X X X Extracts X X X X
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